the edgemarkets

8/15/2019 The Edgemarkets

1/33

FBM KLCI 1636.46 5.93 KLCI FUTURES 1635.50 10.00 STI 2809.23 14.14 RM/USD 4.1440 CPO RM2665.00 22.00 OIL US$49.64 0.40 GOLD US$1241.50 30.30

Najib: Strengthen ties betweenone another during RamadanPAGE 2

Weaker ringgit not seen to push

ination higher than expected4 H O M E BUSI NE SS

FIN N I L

D ILY

w w w . t h e e d g e m a r k e t s . c o m

MAKE

BETTERDECISIONS

PP 9974/08/2013 (032820)

PENINSULAR MALAYSIA RM1.60 (INCLUSIVE OF 6% GST )

MONDAY JUNE 6, 2016 ISSUE 2182/2016

H OM E BUS I N E S S



6 H OM E

7 H OM E

1 W OR L D

onmetall’s palmil extraction plantaining traction

Tree-A’s China JVo remain in the red

or next 3 years

MDEC teams upwith Indonesia’sKejora Group

our-corneredontest for Kuala

Kangsar seat

how politicalmaturity during

lection drive,ays Zahid

China hits at USprovocations’

Amid slowing economic growthin Asean — analysts.

Adeline Paul Raj has thestory on Page 4.

MALAYSIAN BANKS

HOLDING UP DECENTLY against regional peers

1966 FULL CALENDAR, STEEL CASE, 40 MM

LOT 10 S.C., G20-21, KUALA LUMPUR TEL: (03) 2144 1620

PAVILION, LOT 2.41, KUALA LUMPUR TEL: (03) 2148 8930

THE GARDENS MALL, LOT G212 , KUALA LUMPUR TEL: (03) 2201 7830

There is no mystery about a Girard-Perregaux,

simply more than two centuries of craftsmanshipand a perpetual commitment to perfection.

H O ME B U S IN E S S

H O ME B U S IN E S S

6 H OM E

7 H OM E

1 W OR L D

aining traction

ree-A’s China JVo remain in the red

or next 3 years

MDEC teams upwith Indonesia’sKejora Group

our-cornereontest for Kuala

Kangsar seat

how politicalaturity during

lection drive,ays Zahid

China hits at USprovocations’

i l g e n tthin A sean — a a sts.

de ine au R a a e s or on Page 4.

T e E d g e P r o p e r t y. c o m

s m a r t !

G e t h o m e F i n d y o u r n e x t @

Se r io u s l y,

i t ' s t he

O N L Y

p ro pe r t y po

r t a l

yo u nee d


2/33


3/33

2 MONDAY JUNE 6, 2016 • T HEEDGE FINANCIAL DAILY

For breaking news updates go towww.theedgemarkets.com

ON EDGE V

www.theedgemarkets .com

Friday takeaway:Only a fewbright spotsseen in earnings

Malaysia Airlines flighthits turbulence, passen-gers and crew injuredSEPANG: A Malaysia Airlines Bhdight en route to Kuala Lumpurfrom London was hit by severe

turbulence when ying over theBay of Bengal yesterday, whichleft some passengers and crewsuffering from minor injuries. Ina statement yesterday, Malaysia

Airlines said a small number ofaffected passengers and crewhave been treated by medicaloffi cers when the Flight MH1, an

Airbus A380 aircraft, landed ontime at the Kuala Lumpur Inter-national Airport (KLIA) at 6pm

yesterday. “Medical crew andMalaysia Airlines senior manage-ment met the aircraft on arrival atKLIA. A small number of affectedpassengers and crew have beentreated by medical offi cers,” itsaid. — Bernama

TNB’s RM80m PMUsto meet futuredemand in KelantanPASIR PUEH: enaga Na-sional Bhd (NB) is construct-ing two main intake substa-tions (PMUs) in Bandar Baruunjung here and KampungKandis, Bachok, to meet thedemand of energy supply inKelantan in the future. Kelan-tan NB Energy Asset Mainte-nance Department managerMohamad Mohyiddin Mo-hamed Nor said the two PMUs,each valued at RM40 million,are expected to start opera-tions in 2018. “Te construc-tion of the PMU in Bandar Baruunjung is necessary becausethe region has the potential tobe developed mainly throughfederal and state governmentprojects.” — Bernama

Kedah MB warded forintestinal complication

ALOR SEAR : Kedah Ment-eri Besar Datuk Seri AhmadBashah Md Hanipah is suffer-ing from an intestinal com-plication, but it is not serious,State Secretary Datuk BakarDin said yesterday. However,

Ahmad Bashah has to be inintensive care under special-

ist treatment, he said, addingthat the menteri besar was con-scious and in stable condition.“Once his condition is back tonormal in a day or two, he willbe transferred to the normal

ward for further observation,”he told a press conference atthe Kedah Medical Centre here.— Bernama

IN B R IEF

Publisher and Group CEO Ho Kay Tat

EDITORIAL

For News Tips/Press ReleasesTel: 03-7721 8219 Fax: 03-7721 8038Email: [email protected]

Senior Managing Editor Azam ArisExecutive Editors Kathy Fong,Jenny Ng, Siow Chen Ming,Ooi Inn LeongAssociate Editors R B Bhattacharjee,Joyce Goh, Jose Barrock,Vasantha GanesanEditors Cindy Yeap, Kang Siew LiAssistant Editors Adeline Paul Raj,Tan Choe ChoeChief Copy Editor Halim YaacobSenior Copy Editor Melanie ProctorCopy Editors Evelyn Chan,Tham Yek Lee, Tham Kid ChengArt Director Sharon KhohDesign Team Cheryl Loh,Valerie Chin, Aaron Boudville,Aminullah Abdul Karim,Yong Yik Sheng, Tun Mohd ZafianMohd Za’abah, Noorain Duasa

EDITORIAL ADMINISTRATION

Manager Katherine TanAssistant Manager Madeline TanSenior Coordinator Maryani Hassan

CORPORATE

Managing Director Au Foong YeeDeputy Managing Director Lim Shiew Yuin

ADVERTISING & MARKETING

To advertise contact

GL: (03) 7721 8000Fax: (03) 7721 8288Chief Market ing Offi cer Sharon Teh (012) 313 9056General Manager, Digital Media Kingston Low (012) 278 5540Senior Sales ManagersFong Lai Kuan (012) 386 2831Peter Hoe (019) 221 5351Gregory Thu (012) 376 0614Creative Marketing Chris Wong (016) 687 6577Head of Marketi ng Suppo rt & Ad Traffi cLorraine Chan (03) 7721 8001Email: [email protected]

OPERATIONS

To order copyTel: 03-7721 8034 / 8033Fax: 03-7721 8282Email: [email protected]

TheEdgeProperty.com

Managing Director Au Foong YeeEditor Lam Jian WynContributing Editor Sharon KamAssistant Editor James Chong

MARKETING & ADVERTISING

Account DirectorSharon Chew (012) 316 5628

BUSINESS DEVELOPMENT

Senior Manager Elizabeth Lay

The Edge Communications Sdn Bhd

(266980-X)Level 3, Menara KLK, No 1 Jalan PJU 7/6,Mutiara Damansara, 47810 Petaling Jaya,Selangor, Malaysia

Najib: In fact, fasting also trains us tobe punctual, especially in taking thepredawn meal or breaking of the fast.Photo by Bloomberg

KUALA LUMPUR: Muslims in thecoutry should take the opportuni-ty to strengthen ties between oneanother, particularly among theless privileged, in conjunction withthe month of Ramadan, said PrimeMinister Datuk Seri Najib Razak.

Najib said in his Ramadan mes-sage that Muslims are required toenhance their contributions andservices to those who require as-sistance in the holy month.

“We are thankful that the Mus-lims in Malaysia are always ableto contribute to and assist the lessprivileged among us whether withinor outside the country.

“Trough this contribution, wecan feel together the hardship suf-fered by the less privileged group,and the fasting month actually rais-es the awareness of the people toshare the sustenance and bless-ings showered by Allah SW with

Najib: Strengthen ties

between one anotherMuslims should bolster spiritual well-being during Ramadan

KUALA LUMPUR: Muslims through-out the country will observe the fast-ing month beginning today.

Te Keeper of the Rulers’ Seal,Datuk Seri Syed Danial Syed Ah-mad, when making the announc-ment said the date for the beginningof the fast for states throughoutMalaysia has been set for today,according to the decree by the Yangdi-Pertuan Agong after getting theconsent of the Council of Rulers.

Te moon was sighted in elukBandung, Santubong, Sarawak

yesterday.Te brief announcement was

aired live via Radio elevision Ma-laysia yesterday night.

Bernama reported from Larut yesterday that the domestic trade,

co-operatives and consumerismministry will be announcing theprice control scheme for Ramadanin Kuala Kangsar next week.

Its minister Datuk Seri HamzahZainuddin said announcing the listof items under the scheme is a normeach year to ensure stable prices.

Fasting month for Muslims begins today

He said that he hopes after the

announcement is made, it will en-sure prices of Ramadan essentials will not be hiked in order not toburden the people.

Meanwhile, a Bernama reportfrom Jakarta said Muslims in In-donesia will also begin Ramadanfasting today.

Indonesia’s Minister of ReligionLukman Hakim in a statement

broadcast on local television sta-

tions announced yesterday thatthe new moon, which signals theonset of Ramadan, was sightedin a number of districts in therepublic.

Indonesia has a population ofmore than 250 million people, themajority of whom are Muslims,making it the most populous Islam-ic country in the world. — Bernama

the less privileged group,” he said.Te prime minister’s message

in conjunction with the month ofRamadan was uploaded to the web-site www.najibrazak.com yesterday.

Najib also reminded Muslims

in the country to take the oppor-tunity in the month of Ramadan tostrengthen their spiritual well-beingto ensure a better life in the hereafter.

He said that the practice of fastinghad been proven to be able to trainmankind to always be patient in fac-ing any disaster or challenge in life.

“In fact, fasting also trains us tobe punctual, especially in taking thepredawn meal or breaking of the fast.

Te prime minister also hoped

that the month of Ramadan this year could enhance the devotionof Muslims through the practice offasting or abstinence.

“May our country receive themaximum blessings, mercy andforgiveness promised by Allah the

Almighty in the month of Ramadan.“My good wishes to those observ-

ing the fast in the month of Ram-adan al-Mubarak,” Najib added.— Bernama

KUALA LUMPUR: CIMB GroupHoldings Bhd chairman DatukSeri Nazir Razak said his 30-day

volun tary leav e of absence fro m April 19 was a painful period andnot his finest hours.

Following a report in Te WallStreet Journal on March 31 that Na-zir had handled US$7 million onbehalf of his brother Prime Minis-ter Datuk Seri Najib Razak, CIMBBank had to get to the bottom of it.

“he bank’s board of directorshad to decide whether I did an-

ythin g wrong and whet her they

still want me as chairperson.“I felt that for them to do itproperly, I had to step aside,” hesaid on Astro Awani’s ObviouslyHarith Iskander .

Following his leave, the bankappointed an external audit firm,Messrs Ernst & Young, to assist

with the review, which eventua l-

ly concluded that Nazir did notmisuse his position as the thengroup chief executive nor was

there any inappropriate use ofthe bank’s resources.On May 18, CIMB Bank re-

leased a statement saying thatthe review identified some pro-cess shortcomings.

However, the boards of CIMBGroup and CIMB Bank instructedthe management to put in place

plans for immediate improve-ments, as well as to strengtheninternal rules and processes to

avoid reoccurrences moving forward.“I have been in the business

for 25 years, including 15 years aschief executive ... and through-out all of that, I had to make somany quick calls and decisions. I

just hope that most of them weregood,” he added. — Bernama

Tirty-day voluntary leave was painful, says CIMB’s Nazir

Sarawak MuftiDepartmentFalak offi cerUstaz HajiMohamadMokaratlooking at themoon using anequipment called‘Total Station’ yesterday. Photoby Bernama


4/33


5/33

4 H O M E B U S I N E S S MONDAY JUNE 6, 2016 • T HE ED G E FINANCIAL DAILY

Malaysian banks

holding up againstregional peers Amid slowing economic growth in Asean, say analysts

B Y ADE L I N E PAU L R AJ

B Y K A M A R U L A N W A R

KUALA LUMPUR: Malaysian banksare faring not too badly against theirIndonesia, Singapore and Tailandcounterparts on a number of key -nancial metrics amid slowing eco-

nomic growth in Asean, said regionalanalysts.

“Malaysian banks are showinggenerally stable performance inkey financial metrics. We expectnon-performing loans (NPLs) to goup and protability to decrease. Butcapital buffers, liquidity and fund-ing should remain strong,” Moody’sInvestors Service vice-president andsenior credit officer Eugene ar-zimanov told The Edge FinancialDaily in an email interview.

NPLs are one of analysts’ topconcerns for the region as stressesemerge in some segments, especiallycommodities-related ones.

Te gross NPL ratio of Moody’srated banks in Malaysia stood at1.5% as at the end of last year, thelowest of the four markets after Sin-gapore (1.05%).

Moody’s rates 10 banks in Malay-sia — all eight of the local bankinggroups and two foreign banks.

“On average, Malaysian banks areposting lower NPL ratios in the cur-rently challenging environment; thisis despite some new NPLs comingfrom foreign markets such as GreaterChina and Singapore. Domestically,their NPLs remain relatively stable.

“Looking back at 2015 and at therst quarter of 2016, most Malaysianbanks either maintained or improvedtheir loan quality, while banks inSingapore, Indonesia and Tailand

witnessed higher problem loan ra-tios and restructured loan ratios,” theSingapore-based arzimanov said.

“For 2016/2017, we expect Malay-sian banks’ NPLs to increase moder-ately — namely in oil and gas, over-leveraged households, and parts ofreal estate builders,” he added.

He noted that while the problemloan coverage in Malaysia is “good”,at around 90%, it is much stronger inSingapore, Tailand and Indonesiaat 120% to 130%.

Te loan loss coverage (LLC) ratioof Malaysian banks have been trend-ing down as the pace of increase inimpaired loans is faster than that oftheir loan loss reserves.

“In our view, this is not a nec-

essary sign of trouble as the banksare bound by stringent provisioningguidelines. Although several banksreported historical low LLC ratios[in the recent reporting quarter], weare cognisant that collateral valuesremain high,” an AllianceDBS Re-search’s banking analyst said.

According to Moody’s, the share

Comparison of Moody’s Rated Banks in Asean in 2015

MALAYSIA SINGAPORE THAILAND INDONESIA

NIM (%) 1.7 1.52 2.9 5.71 *

Gross NPL ratio (%) 1.5 1.05 2.3 4.72 *

Loan Growth (%) 7.9 **-1 4.3 11

Loan Loss Reserve/NPL (%) 92* 1 30 132 130** As of June 2015** Domestic banking unit loansSource: Moody’s Investors Service

of bank loans related to the ener-gy/commodities sector in Malay-sia stood at around 5% in Malaysiacompared with 11% in Indonesia,and 9% in Tailand and Singapore.

UOB Kay Hian Research, in a re-port on the Asean banking sector last

week, noted that with the sluggisheconomic growth having descendedon Asean countries, loan growth islikely to decelerate to the low singledigits for Singapore, mid-single dig-its for Malaysia and Tailand, andthe low teens for Indonesia in 2016.

Last week, Bank Negara Malay-sia released banking data for themonth of April, which showed thatthe banking system’s loan growthslowed to 6.4% year-on-year (y-o-y),the eighth straight month of loangrowth deceleration. Interestingly,this is the longest stretch of decel-

eration since early 2009. On an an-nualised basis, industry loan growthstood at a mere 0.6%.

Compression in net interest mar-gins (NIMs) will result in lacklustrenet interest income growth in Ma-laysia, Tailand and Indonesia, saidUOB Kay Hian.

In Malaysia, where banks facerising funding costs, it expects NIMsto be compressed by “a severe”10 basis points (bps) this year asbanks compete harder in chasingdeposits. In Tailand, it expectsa NIM squeeze of 10bps too afterbanks cut their lending rates by25bps since March to ease pres-sure on the corporate sector.

Indonesian banks are expected

to suffer the most, though, as thegovernment has demanded thatbanks lower their lending rates tothe single digits in a bid to spureconomic activity.

KUALA LUMPUR: Concerns overthe drop in the ringgit against theUS dollar — reaching as low as4.176 — leading to higher headlineination this year are exaggerated,according to economists.

Julia Goh, economist at UnitedOverseas Bank (Malaysia) Bhd, toldTe Edge Financial Daily that herprojection for the ringgit to closethe year around 4.10 to a US dollarhas been unchanged since March— when it rst irted below 4.0against the greenback.

Goh said direct imports of nalgoods account for only about 15.9%

of the overall consumer price indexbasket. And citing Bank NegaraMalaysia’s study, the direct impactof exchange rate changes on con-sumer prices is often not pervasiveand limited to selected items.

“Ination and cost of living arequite separate. Te rate of ina-tion may look low, but what weindividually experience in terms ofcosts of living depends on the bas-ket of goods you consume, whichprobably differs from the averagebasket used to compute the CPI(consumer price index),” she said.

Of the more than 500 items thatmake up the basket, the food andnon-alcoholic beverages group hasthe biggest weightage — at 30.2%,

while food away from home is justa third of that.

Items that had notable price in-creases last year, however, like ciga-rettes and liquor, and automobiles orhire purchase payments, have onlysingle-digit weightages, when in factpeople tend to spend a considerablepercentage of their incomes on them.

Ination for the rst four monthscame in at 3.2%, with February re-cording the biggest rise of 4.3%before tapering off subsequently,slowing to 2.1% in April. Te majorcontributor to this increase was thealcohol and tobacco group, but theoverall rise paled in comparison

with the group’s 22% jump, given

its weightage of a mere 2.9%.Goh projects the CPI to growby 2.8% for the full year — whichdoesn’t stray much from the ve-

year average increase of 2.44%. Butrecall that ination last year was only2.1% when the ringgit lost over 20%of its value against the greenback,plummeting to as low as 4.457. Fur-thermore, the goods and servicestax (GS) was introduced, whichforced many business owners toadjust their selling prices upwards.

She said currency exchange’s ef-fects on ination tend to have a lageffect. “ypically, current consumerprices are based on stock boughtat the previous rate. Hence, if the

weakness sustains, it will only affect

future prices once the old stock isrun down.”“Last year saw exceptional vol-

atility in the ringgit and as a result we did see a number of producersadjust their prices upwards this

year such as car manufacturers.However, I don’t think the degreeof ringgit weakness in recent pe-

1% 2.1%

Y-o-y (%)

0

1

2

3

4

5

Jan 31, 2015 April 30, 2016

Malaysia CPI

Weaker ringgit not seento push ination higherthan expected

riod warrants another round of ad- justment,

“Moreover, the ringgit strength-ened in the earlier months this year.If importers hedged correctly, theimpact would be less severe,” sheexplained. Although the ringgitnever recouped all its losses fromlast year, the local currency’s closeat 4.145 against the US dollar lastFriday was still 3.48% higher fromDec 31, 2015.

Nonetheless, May’s Nikkei Man-ufacturing Purchasing Managers’Index, a gauge of national factoryactivity, indicated that manufac-turers continued to cut back ontheir purchasing activity for the12th straight month as the weakringgit meant that imported rawmaterial costs increased.

Goh said that manufacturers tendto adjust their prot margins insteadof prices, which then reduces thesensitivity of consumer prices to ex-change rate. But given the resiliencein domestic consumption in the rstquarter this year, she did not discountthe possibility of businesses passingon cost increases to consumers.

“But it is likely to be selective be-cause in this day and age, I think con-sumers are more discerning and withgreater competition, choices and theuse of technology and Internet, con-sumers can sniff out a rotten deal.”

CIMB Investment Bank Bhd direc-tor and chief economist for Malay-

sia Maslynnawati Ahmad secondedGoh’s view, saying there will be lim-ited opportunity for such a move ifbusinesses want to maintain marketshare, given the weaker domesticdemand anticipated ahead.

She projected the ringgit to hov-er between 4.10 and 4.20 to theUS dollar this year, and said thatination this year will come frombase effect factors, domestic fuelprices, and adjustments in pricesof administered items.

Maslynnawati projected the CPIto rise by 3.1%, a rate that she hasmaintained since April.

Lower petrol prices last year sof-tened the blow — if any — from the

weaker ringgit and GS. Recently,

crude oil prices managed to trendupwards — with benchmark Brentspot rising 34.23% so far this yearto US$50.04 (RM204.16) per barrellast Tursday — deviating from last

year’s pattern of near-synchroniseddrop with the ringgit, as concernsover 1Malaysia Development Bhd’s

“Tis would cut NIMs by 100bpsto 150bps and return on equity by upto 2.5 percentage points in the nextthree years,” the research house said.

Singapore banks, on the otherhand, could see NIMs expandingbetween one and six basis pointsthis year, getting a boost from USinterest rate hikes that could po-tentially materialise in the secondhalf of the year.

From an investment standpoint,UOB Kay Hian is the most positiveon Singapore banks as they are seenas beneciaries of the potentiallyhigher US interest rates. It main-tained an “overweight” call on thebanking sector there compared witha “market weight” in Malaysia, Tai-land and Indonesia.

For Malaysia, its main concern iscredit costs going up. “Loan growthhas eased to 6.5%, and NIMs are ex-pected to see a severe 10bps com-pression in 2016. Household lever-age is elevated at 89% and depositgrowth is muted at -0.8% y-o-y.

Credit costs would also normal-ise upwards as industry loan losscoverage is low at 94%. We expectpaltry earnings growth of 3.4% duemainly to cost rationalisation ex-ercises such as mutual separation

schemes,” it said.Its top stock picks in Asean areSingapore’s DBS Bank Ltd and OCBCBank, Malaysia’s RHB Capital Bhd,Tailand’s Kasikornbank Pcl andBank Negara Indonesia.

In the fourth quarter of 2015,gross domestic product growth

slowed to 4.9% y-o-y for In-donesia, 4.2% for

Malaysia and3.8% for Tai-land, andstagnatedat 1.8% forSingapore.

CONTINUES ON PAGE 7

NPLs are one of analysts’top concerns for the

region as stresses emergein some segments,

especially commodities-related ones.

Tarzimanov: For 2016/2017, we expectMalaysian banks’ NPLs to increasemoderately. Photo by Suhaimi Yusuf


6/33

H O M E B U S I N E S S 5ONDAY JUNE 6, 2016 • T HE EDGE F INANCIAL DAILY

in FY16 is achievable.“In 1QFY16, we achieved more

than 50% of what we had project-ed. So, it is not something we can-not achieve for the remaining threequarters.

“Although [our] 2QFY16 net prot won’t be as high as that achieved in1QFY16, but achieving 50% of what

we achieved in the rst quarter ispossible,” he said.

Investors reacted positively tothe strong results and sent Eon-metall’s shares up 36% or 16.5 sen ina day to 63 sen on May 25, its highestclosing price since June 2008. LastFriday, it remained high to close at63 sen. Year to date, the stock hassurged 114%.

Yeoh noted that the companyhad not recognised some 40% of itscurrent SEP order book and this willbe mostly recognised in the secondquarter of this year.

Meanwhile, Eonmetall, whoseSEP market is mainly dominated bythe private sector, is looking to tap

UALA LUMPUR: Tings are look-g up for Penang-based Eonmetallroup Bhd. The metalwork anddustrial process machinery and

quipment manufacturer is seen asmajor beneciary of the rebound

the palm oil industry, given thecrease in demand for new milling

quipment.According to analysts, a compet-

ve advantage Eonmetall has overcompetitors is its palm oil bretraction technology, which cancrease the extraction of oil from

alm fibre by using a combina-on of mechanical and chemicalocesses. Te company holds theoneer status for this technology

ntil 2018. It also owns the exclu-ve patent for a solvent extractionchnique for mesocarp bres until23 to 2024 in Malaysia, Indone-

a and India.Palm bre is a palm fruit waste

oduct that is generally burntgenerate steam or thrown

way.Its managing director

nd chief executive of-er Yeoh Cheng Chyeid Eonmetall, whichlivered three to ve

nits per year of its pat-ted solvent extractionant (SEP) on average

uring the global palm

South Korean transport minister to promote HSR

Eonmetall’s oil extraction

plant gaining tractionCEO condent of net prot target of up to RM20m in FY16 T A N SIEW MUNG

CHESTER TAY

Sen

June 18, 2015 June 3, 2016

0

5

10

15

20

10

20

30

40

50

60

70

80

Vol (mil)

Eonmetall Group Bhd

63 sen

FY11 FY12

Eonmetall’s earnings performance

Net profit (RM mil)

-4

-2

0

2

4

6

8

10

12

FY13 FY14 FY15 FY16(1Q)

9.5

4.98

6.25

-2.78

6.17

11.85

oil boom from 2010 to 2012, expectsto receive at least two new SEP or-ders in the current nancial yearending Dec 31, 2016 (FY16).

“As long as palm oil prices hoveraround RM2,200 per tonne, it willbe a good price for our SEP. Te po-tential market is huge, [as] there aremore than 1,350 mills in Malaysiaand Indonesia. So far, we [have] onlymanaged to build 19 SEPs, whichconstitute a market share of lessthan 10%,” he told Te Edge Finan-cial Daily in an interview.

The SEP business has helpedthe company to turn around, post-ing a net prot of RM5.22 millionin FY15, compared to a net loss ofRM3.01 million in FY14. Revenuegrew 24% to RM79.66 million, outof which half was derived from itspatented SEP jobs.

For the rst quarter ended March31, 2016 (1QFY16), Eonmetall re-corded a net prot of RM11.85 mil-

lion, from a net loss ofRM155,000 in 1QFY15,

as its revenuemore than dou-

bled to RM32.9million, fromRM15.38 mil-lion a year ago.

Ye o h i scondent thathis net profittarget of up toRM20 million

into the government-linked plant-er market via potential joint ven-tures (JVs) or build-operate-transfer(BO) projects.

“raditionally, we sell plants. o-day, we are looking at potential JVsand BOT projects. We are in talks

with a government-linked company(GLC), which potentially can affordup to six SEP units,” said Yeoh, add-ing that it expects to secure moreGLC clients to invest in its SEP unitsand help improve their oil extrac-tion rates.

Currently, Eonmetall’s in-housecapacity is able to build eight to 10plants per year, with a selling priceof up to RM10 million each.

Yeoh said the company is alsolooking to move into the midstreammarket and set up its own palm oilmill in two years, starting with In-donesia, the world’s largest palmoil producer and exporter.

“We believe in diversication,so we are not too dependent on aparticular industry. oday, you have

EOUL: Te South Korean ministryland, infrastructure and trans-

ort (Molit) plans to engage withe relevant parties in Malaysia toomote its high-speed rail (HSR)chnology, in a move to facilitate auth Korean consortium’s bid fore upcoming 375km Kuala Lum-

ur-Singapore HSR project.In an interview with media del-

ates, Molit Minister Kang Hoinid he will be travelling to Kuala

umpur on June 14 to promoteuth Korean HSR technology, but

d not elaborate the specic Ma-ysian government offi cials whoe plans to meet.

“We can build the HSR system,anufacture the rolling stocks andn the operation by using [South]

orean technology. Although wed export some parts of [our] roll-g stocks to urkey before this, but

never before we exported the entiresystem supported by our technol-ogy. So if we secure the KL-Singa-pore HSR, it will be the rst case for[South] Korea to export the wholeHSR system,” he said.

Although South Korea’s expe-rience in HSR development onlybegan in 2004, through technologytransfer from French rail company

Alstom SA, Kang said Korea RailNetwork Authority (KRNA) hadmanaged to fully localise and de-

velop its own technology. While he is proud of his coun-

try’s HSR technology development,

Kang conceded that South Koreais still slightly behind Chinese andJapanese bidders in terms of nan-cial schemes.

Nevertheless, he opined thatSouth Korean bidders had an edgein terms of technology, which offersa HSR system with higher effi cien-cy that would led to lower costs of

operation and maintenance.Kang pointed out that construc-

tion usually constitutes 30% of thetotal cost of a HSR project, whilethe remaining 70% is normallyaccounted for management andmaintenance costs.

“Malaysia and [South] Korea were not very active in transpor-tation collaboration. But [South]Korea is very strong in technolog-ical transfer, so in this aspect, inthe longer term, we can help savea lot of cost[s] in management andmaintenance of [the] KL-SingaporeHSR,” he said.

Kang added that currently, notonly is the consortium interested inthe KL-Singapore HSR project, butseveral senior government offi cialsincluding himself are very keento secure the construction works.

“Tat is why since last year, wehave been very active in promot-ing our technology to the Malay-

sian government; we even set upa [South] Korean rail technologyexhibition centre in KL,” he said.

Last November, the MalaysianLand Public ransport Commission(Spad) and Singapore’s Land rans-port Authority (LTA) announcedthat they had received 98 submis-sions in response to a joint requestfor information exercise for theKL-Singapore HSR project.

Spad and the LTA said thesecompanies and consortia comefrom across the HSR value chain,

which includes entities based inMalaysia, Singapore, Asia-Pacic,

Europe, the Middle East and North America.Of the total submissions, 13 were

from Malaysia, 56 from Europe, 14from East Asia, seven from North

America, four from Singapore, threefrom Oceania, and one from theMiddle East.

Both agencies also mentioned

that the governments of Malaysiaand Singapore expect to nalise thecommercial model and procurementapproach of the project by this year.

South Korea, being one of thecandidates from East Asia, hasformed a 27-rm consortium ledby KRNA, a rail construction unitunder the country’s Molit.

Te construction of the KL-Sin-gapore HSR was to have started inthe third quarter of 2015. However,the commencement of works waspostponed to 2017, with comple-tion in 2022.

Originally, Singapore and Ma-

laysia had announced that the HSRproposal would be nalised by theend of 2014, with a targeted com-pletion date in 2020.

Te KL-Singapore HSR projectis expected to trim travel time be-tween the two cities to about 90minutes, compared with up to vehours by road.

seen many mill suppliers becomemill operators. We hope that oneday, we can also become an oper-ator,” he added.

Yeoh is of the view that when thecompany becomes a mill operator,it will bring in recurring income, al-though the margin won’t be as highas that of an equipment supplier.

For starters, Eonmetall in 2012formed a JV with Koperasi Unit Desato explore the viability of the busi-

ness. Eonmetall holds a 88% stakein the JV.

According to Yeoh, the JV has notbeen taken off in the last few yearsbecause of political uncertainty inIndonesia, and the investment ofup to RM100 million is signicantfor Eonmetall.

However, as the Indonesian pres-idential election is now over, coupled

with the fact that the company’sgearing ratio is at 0.33 times, whichis considered low among steel play-ers, Yeoh believes it is now time forEonmetall to initiate the plan.

Unlike other steel players, Eo-nmetall only made losses in FY14,due to high provision for steel amida downturn. Tis was attributed tothe group’s well-balanced contri-butions from steel and plantationmachinery.

Yeoh emphasised that the com-pany’s steel product and tradingactivity segment had made protsin the last six consecutive quarters,regardless of whether the market

was good or bad. If the division con-tributes the same amount of protas in the last few quarters, the com-pany is already on track to achievethe RM20 million net prot targetin FY16.

eoh says Eonmetall islso looking to move intohe midstream marketnd set up its ownalm oil mill inwo years.


7/33

6 H O M E B U S I N E S S MONDAY JUNE 6, 2016 • T HE EDGE F INANCIAL DAILY

Tree-A’s China JV to stay

in the red for next 3 yearsMD says plant will turn protable once it achieves optimum operating capacity BY GHO CHE E YUA N

BY SUP RIYA SURE ND RA N

KUALA LUMPUR: When Tree-AResources Bhd’s hydrolysed vege-table protein plant in China com-menced operations in April 2012,there was expectation that the ven-ture would become a major earningsdriver for the company, as it pavedthe way for the food ingredientsproducer to tap into the burgeoningChinese food and beverage (F&B)

market.But that did not happen. he

joint-venture (JV) company hasbeen in the red since its establish-ment in 2010, with losses wideningto RM14.65 million for the nancial

year ended Dec 31, 2015 (FY15),from RM168,024 in FY10.

Tree-A managing director FangChew Han said the JV is likely toremain in the red for the next three

years, as it has yet to achieve its op-timum operating level to offset itsoperating overheads.

Te JV is principally engaged inmanufacturing soya protein (techni-cally known as hydrolysed vegetableprotein) and related by-products.

“We aim to turn it around in three years’ time and we are working

KUALA LUMPUR: AIA Bhd has comeout with a new programme that inte-grates health and wellness benets

with the group’s life insurance andtakaful solutions, and the insureraims to sign up 30,000 participantsby the end of this year.

he company said the sci-

ence-backed programme called “AIA Vitality” provides participants withthe knowledge, tools and motivationto improve their health.

“Customers who join the pro-gramme stand to enjoy additionallife insurance or takaful coverageon selected plans, free of charge.

“Tey will also get customisedadvice, guidance and even receiverewards to incentivise them to behealthier,” AIA said in a statement.

Te insurer said the programmeis in line with the group’s commit-ment to champion healthy living andfocus on preventive healthcare forindividuals and families in Malaysiaand across the Asia-Pacic region.

“Since lifestyle choices are re-

sponsible for more than 80% of thedisease burden and 50% of all deaths worldwide, we really want to helppeople make healthier choices,” said

AIA group chief executive and pres-ident Mark ucker.

“AIA Vitality is a game changerfor the industry and a win-win foreveryone — for our customers, for

closely with our counterpart (Wil-mar International Ltd) to strength-en the JV.

“We are also expanding our dis-tribution network to provide betterservice to our existing customersand potential customers,” Fang toldTe Edge Financial Daily in an in-terview recently.

Fang said China’s market is veryhuge, and holds tremendous growthand protability potential for the

company’s products.“We are still a small player there.

I believe the JV will turn protableonce it achieves optimum operat-ing capacity,” he said, without dis-closing the current utilisation rateof the plant.

“We are looking for potential cus-tomers by demonstrating our goodtrack record of selling good-qualityproducts, which we think is vital indoing business,” he shared.

hree-A (Qinhuangdao) FoodIndustries Co Ltd is a JV betweenTree-A and billionaire an Sri Rob-ert Kuok’s Wilmar International, aSingapore-listed company. It wasset up at the time when Wilmar tookup a 15.65% stake in Tree-A. Un-der the agreement, both companies

committed to investing up to US$40million in the JV.

As at the end of 2015, Tree-Ahad invested a total of US$8.55 mil-lion, while the balance of the invest-ment commitment in the JV stoodat US$1.45 million, according to its2015 annual report.

A recent study by Te Economistmagazine showed that China is thesecond-fastest growing F&B marketamong major Asian countries, with

an average annual growth rate of30% in the past ve years.

Meanwhile, the Chinese NationalBureau of Statistics reported that theaverage annual growth rate of F&Bimports had been around 15% inthe last ve years.

Tree-A derives 67% of its turn-over from the domestic market andthe balance of 33% is contributedby the exports market. Te group,

which is in the midst of expandingits capacity, is also set to tap theresilient growth in the F&B sectorto continue sustaining its earnings.

According to Fang, the company will continue to invest in capaci-ty expansion in order to maintainits growth in turnover. He said thecompany had spent RM20 million to

build its third manufacturing plant,an extension to its current plant inKampung Baru Sungai Buloh.

“he plant will commence itsoperations by the third quarter ofthis year, and will have a capacity ofabout 2,000 tonnes a month. Withthe new plant, our total capacity

will leap to 3,200 tonnes a month,”he said.

“Te investment in the facilityincludes making it more effi cient,

so the protability of the companycan be improved,” he added.

Tough the third plant has yet tostart operations, Fang said the com-pany had already received orders formaltodextrin from the plant.

Given this, he expects the addi-tional maltodextrin production tospur the company’s revenue, which

will stimulate double-digit growthfor hree-A in the current finan-cial year.

It is understood that Tree-A sellsmaltodextrin at between RM2,000and RM2,600 per tonne, dependingon the grade and quality.

A back-of-the-envelope calcu-lation showed that hree-A mayrecord at least RM48 million in rev-enue a year, based on an average

selling price of RM2,000 per tonne.“Demand for our product re-

mains high and we are also con-stantly looking for new buyers,” hesaid.

Tree-A is a producer of malto-dextrin, a polysaccharide that is usedas a food additive, and commonlyused for the production of soft drinksand candy. It can also be found asan ingredient in a variety of otherprocessed foods.

Maltodextrin is produced fromstarch by partial hydrolysis and isusually found as a white hygroscopicspray-dried powder.

Tree-A’s net prot for the rstquarter of FY16 surged 90.1% toRM6.69 million or 1.7 sen per share,from RM3.52 million or 0.89 sen pershare a year ago, on higher revenueand lower share of losses on a jointlycontrolled entity.

Revenue for the quarter jumped44.2% to RM107.57 million, fromRM74.6 million previously, as a re-sult of higher sales of its products.

Tree-A’s share price has beensurging over the past month to reachRM1.43 last Friday, compared withRM1.04 a month ago, with a marketcapitalisation of RM562.85 million.

AIA launches plan with motivation to improve healththe entire community, for our part-ners and for AIA,” he added.

AIA Vitality is the rst programmeof its kind in the Malaysian life in-surance and takaful space, and isa collaboration between AIA andDiscovery Ltd, an insurer headquar-tered in South Africa.

he programme uses princi-ples of behavioural economics to

promote healthy habits, rewardingmembers with meaningful benetsand discounts for taking sustainablesteps, however small, to improvetheir health and well-being.

AIA chief executive offi cer Anu-sha Tavarajah said AIA Vitality isthe way forward, not just for AIA,but also for the life insurance andtakaful industries in Malaysia.

“By incentivising our customersto take better care of their healththrough simple, sustainable ways,they will experience better health.Tis will translate into long-termhealthcare savings, which are es-pecially relevant and meaningfulin view of rising healthcare costs inMalaysia,” said Anusha.

Customers who participate in AIA Vitality must rst complete the AIA Vitality Health Review to determinetheir “AIA Vitality Age”, an indicatorof overall health that may be higheror lower than their actual age.

Customers then receive a setof clearly dened personal healthgoals, which they can meet by engag-

ing in a broad choice of healthy ac-tivities, including running, walkingand other forms of exercises, buyinghealthy groceries at the supermar-ket or having a medical check-up.

hey will earn “AIA VitalityPoints” for successfully complet-ing each activity. Te more points

they earn, the greater their rewards.Based on research done in exist-ing AIA Vitality markets, customerengagement in the rst policy yearimproved by up to 15 times, andpolicy retention also increased onthe back of continuous customercommunication with AIA.

“As the largest private health in-

surer and leading provider of em-ployee benefits solutions in Ma-laysia, we want to take the lead inmaking a positive difference in so-ciety by improving the health and

well-being of Malaysians.“With AIA Vitality, we can help

our customers achieve better health

through realistic and sustainablesteps,” said Anusha.She added that the company’s

three million individual policy-holders and 1.5 million corporatemembers present an organic poolof customers for the life insurer totap into.

AIA Vitality membership will rst

be opened to customers who pur-chase any new life insurance policyor takaful certicate with AIA.

For customers who sign up for AIA Vital ity with AIA’s fl agshipproducts A-Life Link or its takafulequivalent, A-Life Link-i, they canpotentially receive free additionalcoverage of up to 45% on death anddisability. Tis additional coverage

will var y annually, depending onhow engaged the member is withthe programme.

he programme will be madeavailable to existing AIA custom-ers later this year. AIA will also bepiloting AIA Vitality with selectedcorporate clients as part of AIA’sCorporate Solutions employee ben-ets programme.

he launch of AIA Vitality inMalaysia follows the life insurer’ssharper focus on health that beganin 2013, and which has been gath-ering momentum, underpinned bynew product offerings designed tocater to specic medical needs, as

well as marketing and sponsorshipinitiatives that are centred on pro-

moting healthy living.“Tis focus on health is a naturalprogression for our company. We

want to be there every step of the way, engaging with our customers,encouraging them to stay t and ac-tive, and keeping up-to-date on theirneeds and aspirations, and those oftheir families,” said Anusha.

(From left) AIA Group regional chief executive Bill Lisle, Anusha a nd Tucker at the AIAVitality launch in Kuala Lumpur. Photo by Kenny Yap


8/33

H O M E B U S I N E S S 7ONDAY JUNE 6, 2016 • T HE ED G E F INANCIAL DAILY

MDEC teams up

with Indonesia’sKejora Groupo facilitate business expansion opportunities in technology

YIMIE YO NG

CHE N SHA UA F UI

dollar-denominated bond de-fault saw the ringgit giving backmore than half of its gain earli-er this year against the dollar.

“But domestic fuel prices arestill slow to adjust as I think the

product prices have yet to catchup with the rise in crude oil pric-es,” said Maslynnawati. “Hence,

we expect domestic fuel prices would rise, albeit at a gradualpace and that would contributeto the likely faster rise in CPI inthe second half of 2016.”

Given that imported petrole-um products are priced in dol-lars, Goh said there will be a for-eign exchange impact on petrolpump prices as consumers payin ringgit. Consequently, the re-bound in oil prices and ringgit’srecent fall should bring higherpetrol prices in theory.

“What we pay at the pumpis affected by global oil prices

and ringgit. Te fuel componentfor personal transport carries7.8% weight in the overall CPIbasket.” Tis month, petrol anddiesel prices are the same astwo months prior, “to my relief,”she said.

Regardless, the ringgit’s weak-ening should leave some people

and businesses fretting, depend-ing on their exposure to foreigncurrencies. Forexime Ltd chiefmarket analyst Jameel Ahmadsaid the local currency is goingto remain under pressure if in-

vest ors conti nue to bet on animpending US interest rate rise.

“Economic data showed

last uesday that US consum-er spending has climbed to itshighest levels in around seven

years, which is extremely positivefor the United States when youconsider consumer spendingaccounts for the highest propor-tion of its GDP output at arounda reported 70%.” he said.

KUALA LUMPUR: CIMB GroupHoldings Bhd and Sompo JapanNipponkoa Holdings Inc last

Friday announced a partnershipthat will see the bank distrib-ute Sompo’s non-life insuranceproducts through its branchnetwork in four core markets,namely Malaysia, Indonesia,Singapore and Tailand.

In a statement, Sompo said its wholly-owned subsidiary Som-po Holdings (Asia) Pte Ltd hadentered into a long-term non-life bancassurance distributionagreement with CIMB for South-east Asia, subject to the execu-tion of in-country deals.

hrough this partnership,Sompo group chief executiveoffi cer Kengo Sakurada said thegroup will be able to distribute

its non-life insurance productsto over 12 million customersof CIMB across the bank’s ex-tensive network of some 1,000branches, as well as via its In-ternet and mobile banking plat-forms.

“We are mainly expandingour retail business in emergingcountries, and currently operatein six countries through localsubsidiaries and have repre-sentative o ffi ces in two coun-tries in the Asean region. Wehave successfully achieved a38% increase in our gross writ-ten premium during these two

years, which was more than twotimes higher than the marketgrowth during the comparableperiod,” he said.

“he Asean non-life insur-ance market is expected to growat a compound annual growthrate of 7% over the next 10 years

to reach a total market size ofUS$50 billion by 2025,” Sakura-da added.

“Bancassurance is one of thekey components of CIMB’s con-sumer and commercial proposi-tion, in line with the group’s di-rection to grow these segmentsto achieve the goals of our arget2018 strategy,” CIMB group chiefexecutive offi cer engku DatukSeri Zafrul engku Abdul Azizsaid in a sep arate statement.

“Tis partnership will reapbenefits not only from CIMBGroup’s core strength in distri-bution of bancassurance prod-ucts, but also from Sompo’s ca-pabilities in digital technologyto drive growth in our bancas-surance segment.

“Having a strong regionalpartner also facilitates syner-gies and operational effi ciencies,enabling CIMB Group to deliverbetter value to our customersacross Asean,” added Zafrul.

‘Domestic fuel prices slow to adjust ‘

CIMB partners Sompo to distributenon-life insurance products

Zafrul: Bancassurance is one of thekey components of CIMB’s consumerand commercial proposition.Photo by Haris Hassan

KARA: he Malaysia Digitalconomy Corp (MDEC) last Fri-ay announced a strategic partner-ip with Kejora Group, Indonesia’sading company-building venture

pital rm, to facilitate businesspansion opportunities for a mu-ally beneficial and synergeticlationship between companies

nder the portfolio of each party.“MDEC is committed to driv-

g this synergistic approach tonnect MDEC’s digital economy

adership in the areas of marketcess and IP (intellectual proper-) creation with Kejora’s expertiseIndonesia’s funding ecosystem,”id MDEC chief executive offi ceratuk Yasmin Mahmood at thegning ceremony of the memo-ndum of understanding here.She explained that MDEC will

ovide Kejora and its affi liated com-

panies access to potential Malaysianclients and venture capital network,a soft landing platform in Malaysia,and support over insights into nan-cial resources, strategic partners,and business models’ renement.

In return, Kejora will provide sim-

ilar support for MDEC in Indonesia.“echnology and digital industry

is the most exciting sector. Tere area lot of investments in the planta-tion sector and other sectors amongMalaysian and Indonesian compa-nies. It should be the same for thetechnology and digital industry,”she said.

Andy Zain, founding partner ofKejora Group, said: “Tis is an op-portunity for both parties to learnfrom each other. We are delighted

with the partnership, as it allows usto continue building and investingin technology start-ups — creating atech ecosystem of venture builders,investors, incubators, event space,

and co-working space. We look forward to further contributing to thenation’s digital road map.”

In his speech at the ceremony,he said he is very impressed withMalaysia as the technology indus-try contributes 17% to its gross do-mestic product.

Meanwhile, last Friday alsomarked MDEC’s instrumental rolein facilitating three alliances amongMalaysian and Indonesian techcompanies, signied by a ceremonyof document exchanges that out-lines their intention to collaborate.Te alliances are between P Sig-ma Cipta Ceraka or elkom Sigmaand riAset Sdn Bhd, Jocom andLojai.com, and IFCA Property365Indonesia and P Sindeli Proper-tindo Abadi.

MDEC is the government agen-cy responsible for developing thenational information and com-munications technology industry.

UALA LUMPUR: Cognizant ech-ology Solutions Corp, a Nas-aq-listed information technolo-

(I), consulting and businessocess outsourcing (BPO) servicesovider, is aiming to tap into thest-growing Asia-Pacic market

y setting up a delivery centre inalaysia.Cognizant has set up the deliv-

y centre in April to help serve itsents from various sectors such as

nance and oil and gas in Malaysiand the region.

Cognizant vice-president andad for Asia-Pacic, Jayajyoti Sen-

upta, said the move is expectedboost the group’s revenue in

sia-Pacifi c, which grew about% last year.Te group began its operationsMalaysia six years ago, but the

d premise was smaller and wasainly to serve a few anchor cus-mers, Jayajyoti recalled.He explained that what Cogni-

nt does is help its clients in theirgital transformation journey, notst in I transformation, but busi-

ess strategy transformation thateds to be enabled by technology.It also helps companies optimise

eir existing spending to help funde transformation.Jayajyoti believed that Asia has

Nasdaq-listed Cognizant sees Malaysiaas springboard to Asia-Pacic markets

huge potential for growth given thatthe companies are now more readyto embrace digital transformationas they have no legacy issues.

He explained that companiesin the United States have investedmillions in their legacy and they

would have to consider their leg-acy before moving on to another

new technology. In comparison,companies in Asia are mostly notdigitised yet and would have norestriction when it comes to em-bracing new I.

“We have a large component ofconsulting businesses, we have tra-ditional I services, we have digitalcomponent, which is slowly gainingmomentum and becoming moremainstream,” Jayajyoti told Te EdgeFinancial Daily in an interview.

He added that recent develop-ments on the legislation on intellec-tual property and data protection inMalaysia and the region also providegrowth opportunities for the group.

Cognizant saw its revenue jump21% for the nancial year ended Dec

31, 2015 (FY15) to US$12.41 billionfrom US$10.26 billion in FY14. Itsoperating prot also rose 13.8% toUS$2.14 billion in FY15, compared

with US$1.88 billion in FY14.Te group’s main contribution is

from North America region, whichaccounted for 79% of its revenuelast year. Another 16.2% was derived

from the European region, and theremaining 5.2% from the rest of the

world, primarily Asia-Pacic.“We believe the Asian market has

the potential to grow faster, includ-ing Malaysia,” its executive vice-pres-ident for Continental Europe and

Asia-Pacic Santosh Tomas said.Santosh said this is a good time

in technology, as it has moved froma support function to become anenabler of strategy.

“Tere isn’t a single boardroomtoday that is not worried about

what technology can do for them,but what they are not doing, which

will enable competition to do whatthey are doing,” he added.

As technology changes rapidlyeveryday, Santosh believed it isimportant for Cognizant to developtalents who have the skills and theright attitude for the group. And oneof the reasons why Cognizant set upits delivery centre here is becauseit is able to access to thousands oftalents in Malaysia.

Jayajyoti concurred, saying the

group prefers to stay in Kuala Lum-pur for now as it can source talentsfrom the Klang Valley and also near-by states such as Melaka.

“As we grow in scale, we willdenitely look at other locationssuch as Johor and Sarawak, where

we are looking at some universitiesto source talents,” he added.

BY T A N SIE W MUNG

FROM PAGE 4

RM

3.0

3.5

4.0

4.5

5.0

Dec 31, 2014 June 3, 2016

Ringgit vs US$

RM4.145


9/33

8 S T O C K S W I T H M O M E N T U M MONDAY JUNE 6, 2016 • T HE EDGE FINANCIAL DAILY

www.theedgemarkets.com

Stocks with momentum were picked up using a proprietary algorithm by Asia Analytica Data Sdn Bhd and first appeared atwww.theedgemarkets.com.Please exercise your own judgement or seek professional advice for your specific investment needs. We are not responsible for your investment decisions.

Our shareholders, directors and employees may have positions in any of the stocks mentioned.

PWF CONSOLIDATED BHD Valuation score*

Fundamental score**

TTM P/E (x)

TTM PEG (x)

P/NAV (x)

TTM Dividend yield (%)

Market capitalisation (mil)

Shares outstanding (ex-treasury) mil

Beta

12-month price range

2.00

0.50

19.08

(0.40)

0.52

3.85

115.64

74.61

0.42

0.98-1.55

*Valuation score - Composite measure of historical return & valuation

**Fundamental score - Composite measure of balance sheet strength

& profitability

Note: A score of 3.0 is the best to have and 0.0 is the worst to have

LINGKARAN TRANS KOTA HOLDINGS BHD Valuation score*

Fundamental score**

TTM P/E (x)

TTM PEG (x)

P/NAV (x)TTM Dividend yield (%)

Market capitalisation (mil)

Shares outstanding (ex-treasury) mil

Beta


2.10

2.00

16.22

0.62

4.654.62

2,823.71

522.91

0.32

3.80-5.50



& profitability


CREST BUILDER HOLDINGS BHD Valuation score*

Fundamental score**

TTM P/E (x)

TTM PEG (x)

P/NAV (x)

TTM Dividend yield (%)

Market capitalisation (mil)Shares outstanding (ex-treasury) mil

Beta


2.00

0.45

22.30

(0.32)

0.42

3.84

165.84170.97

0.49

0.85-1.15



& profitability


PWF CONSOLIDATED BHD (+ve)

LINGKARAN TRANS KOTA HOLDINGS BHD (-ve)

CREST BUILDER HOLDINGS BHD (-ve)

PWF Consolidated Bhd (fundamental:0.5 /3, valuation: 2/3) saw its shares dipone sen or 0.65% to RM1.54 last Friday.he counter saw 477,100 shares changedhands, higher than its 200-day average

volum e of 6 2,477 un its.Its share price has been trading up-

wards since May 3 1, afte r the grou p an-nounced its financial results for the firstquarter ended March 31,2016.

Its net profit grew 12.4% to RM3.73million, from RM3.32 million a year ago,due to an increase in sales volume and

selling prices of broilers. Meanwhile,its revenue increased 20.9% to RM83.64million, from RM71.65 million last year.

PWF is principally engaged in poultryfarming, including breeding of broilers,ducks, day-old chicks and other livestock,as well as processing of chickens andducks, animal feed milling and tradingof agricultural products.

he counter is trading at a 12-monthtrailing price-earnings ratio of 19.07times, compared with Lay Hong Bhd’s29.16 times.

SHARES in Lingkaran rans Kota Hold-ings Bhd (Litrak) (fundamental: 2/3,

valua tio n: 2.1 /3) clo sed thr ee se n or0.56% higher at RM5.43 last Friday. Atotal of 1.12 million shares were traded,significantly higher than the 200-dayaverage volume of 338,560 units.

his is the second time the LebuhrayaDamansara-Puchong (LDP) highwayconcession company has triggered ourmomentum algorithm. The first time

was o n Apri l 27, w hich saw the co unter

gain 2.45% since.Litrak’s net profit rose to RM54.97

million for the fourth quarter endedMarch 31, 2016, against RM33.09 mil-lion last year, due to the scheduled tollrate increase for LDP on Jan 1, 2016.

Its quarterly revenue expanded toRM131.64 million, from RM93.82 mil-lion a year ago.

he counter is trading at a 12-monthtrailing price-earnings ratio of 0.61times.

CRES Builder Holdings Bhd (fundamen-tal: 0.45/3, valuation: 2/3) closed one senor 1.03% lower at 96 sen last Friday, with2.8 million shares traded.

Te counter has been trading upwardssince May 31, and gained 4.34% at theclosing price of 96 sen last Friday. Yearto date, however, the counter has de-clined 5.88%.

Te group is involved in infrastructuredevelopment such as roads and bridges,building development such as hospitals,

schools and universities, as well as com-mercial and residential developments.

Tis is the rst time Crest Builder hastriggered our momentum algorithm this

year.Its net prot for the rst quarter ended

March 31, 2016 dipped to RM2.55 million,from RM3.92 million a year ago.

Its revenue also declined to RM51.77million, from RM61.43 million last year.

Te counter is trading at a 12-monthtrailing price-earnings ratio of 22.29 times.

A chat with The Edge journalists on the storybehind their stories each week.Uploaded on Monday @ 1.30pm

on web + mobile

Anytime, anywhere on www.theedgemarkets.com


10/33

P R O P E RT Y S NA P S H T 9ONDAY JUNE 6, 2016 • T HE EDGE FINANCIAL DAILY

Malaysia’s‘father of valuation’passes away

The changing faceof Kepong

Malls must stayrelevant to thrive

Avanti Residences’final phase is55% sold

Sustainability wins itfor S P Setia

Reducing electricityusage is not thatdiffi cult

MOST READ ON

TheEdgeProperty.com

trendanalysis

latestclassified

listingsand more

FREEtransaction

datanews analytics

JO YCE KO H

Kota Damansara getsincreasingly attractive• Tis week, the spotlight falls on the secondary market of non-landed residences

in Kota Damansara. Located at the periphery of Petaling Jaya in Selangor, Kota

Damansara neighbours the established townships of Mutiara Damansara at the

East and ropicana at the South.

• While Kota Damansara was originally developed as a low- to medium-cost

housing estate, the neighbourhood is on the property investor’s radar due to its

proximity to the heart of Petaling Jaya and next to the future Kwasa Damansara

township.

• Te newer developments are centered around Persiaran Surian and the

commercial hubs at Te Strand and Dataran Sunway. Persiaran Surian will

welcome two new MR stations along the Sungai Buloh-Kajang line due in 2017.

• Based on TeEdgeProperty.com’s analysis of transactions, the average transacted

price of non-landed homes has jumped signicantly in 2014 to reach RM382 per

sq ft in 1Q2015. Tis represents a 39% y-o-y growth from RM275 psf in 1Q2014,

following a mere 4% y-o-y growth in the preceding year.

• Te average price appreciation was driven by the completions of Cascades and I

Residence and by the lack of transactions within the lower ranges.

• Correspondingly, transaction activity has fallen, with a noticeable lack of

transactions in the lower-end. ransaction volume for the 12 months to 1Q2015

retreated a slight 47.5% y-o-y from 417 units to 219 units.

• Kota Damansara is becoming increasingly attractive with new upscale

developments such as Sunway Nexis, improved connectivity with the upcoming

Sungai Buloh–Kajang MR line and its strategic location.

The Analytics are based on the data available at the date of publication and may be subject to revision as and

when more data becomes available.

Kota Damansara non-landed residential average price

by average transacted price

Kota Damansara non-landed residential transaction volumeby average transacted price

Source: TheEdgeProperty.com

Source: TheEdgeProperty.com

Golden Glory’s IPO to fund Myanmar property drive

NGAPORE: Golden Glory Groupe Ltd, a developer of Myanmaral estate, is planning an initial

ublic offering (IPO) in Singaporeis year as the opening of the fron-

er market spurs property demandSoutheast Asia’s fastest-growing

onomy.he Singapore-based compa-y is targeting an US$80 millionM332 million) to US$100 millionitial share sale, raising capital to

elp fund land bank acquisitionsMyanmar, chief executive offi cer

hristopher Wu said in an interviewYangon.Myanmar’s economic opening

creating opportunities for prop-ty developers like Golden Glo-

ry, whose fundraising efforts couldalso offer foreign investors a way toparticipate in the country’s growth.Golden Glory is currently develop-

New price indicator shows no housing bubble in Philippines

EBU (Philippines): Philippine

ouse ination rose at a faster an-ual pace in the rst quarter of thisar compared with the previous

uarter, the central bank said, citinge rst results of a newly formulat-

d index tracking property prices.Te residential real estate price

dex (RREPI), which covers differ-nt types of housing units, climbed

9.2% in the rst three months of this

year from a year earlier.Tat was higher than the annualincreases of 5.1% and 4.3% in thefourth and third quarters of 2015,but lower than the 12.8% gain in thesecond quarter of last year.

Diwa Guinigundo, deputy gov-ernor of the Bangko Sentral ng Pili-pinas, said the first-quarter rate

pointed to a “vibrant” housing in-

dustry that was “driven by demandand not by oversupply” and that thelikelihood of asset price ination

was “quite remote”.Te RREPI is the rst such in-

dicator in the Philippines and isbased on banks’ approved hous-ing loan applications. Te index

would help regulators track proper-

ty prices, credit market conditions

and assess the risks arising fromthe booming real estate market inthe Philippines, Guinigundo saidlast Friday.

Guinigundo said the index wouldbecome a better gauge of risk as pol-icymakers collect more information,allowing them to create a longer se-ries of data. — Reuters

Wu says the property market is ‘pickingup speed’ following last year’s elections.

ing a mixed development in Yangoncalled Polo Club (Asia) Residenceand an industrial park about 20kmfrom the capital Naypyidaw.

Wu, 53, said the property marketis “picking up speed” following last

year’s ele ctions. Separately, newlaws and eased foreign sanctions arealso attracting overseas investors to

an economy the International Mon-etary Fund estimates will grow 8.6%this year, the most in Asia.

“Te door has opened,” Wu said.“More foreign companies are set-ting up offi ces,” strengthening de-mand for residences, as well as of-ce premises, while more and morepeople are looking for investmentopportunities to beat the rate of in-ation, he said.

Te Yangon project will include

hundreds of high-end residentialunits, serviced apartments, a ve-star hotel, shops and offices, ac-cording to the company’s website.

Golden Glory will join listed com-panies in Singapore with exposureto Myanmar such as property devel-oper Yoma Strategic Holdings Ltd,controlled by businessman Serge

Pun, and petroleum explorer InterraResources Ltd.he company’s chairman and

shareholder is Khin Maung Aye, who’s also the chairman of Myan-mar conglomerate Lat War Group ofCompanies. Te conglomerate wasestablished in 1999 as a garmentand textile contract manufacturer,and has expanded into real estate,paper and pulp, and power gener-ation. — Bloomberg


11/33


12/33


13/33

1 2 B R O K E R S ’ C A L L MONDAY JUNE 6, 2016 • T HEEDGE FINANCIAL DAILY

S P Setia’s leadership

uncertainty removed

UMW Oil & Gas Corp Bhd(June 3, 95 sen)Maintain hold with an un-changed fair value (FV) of 80sen: Our rating and FV for UMW

Oil & Gas Corp Bhd (UMWOG)are based on the group’s nancial

year ending Dec 31, 2016 forecast(FY16F) book value, with a 20%discount to its rig costs.

Our FY16F to FY18F losses aremaintained, which have alreadyincorporated additional earningsfrom Naga 6 contract, assuminga daily charter rate of US$75,000(RM306,000) and a commence-ment date in the fourth quarter(4QFY16). Recall that UMWOGrecently secured a conditionalcharter contract for its Naga 6

jack-up rig from Petronas Cari-gali Sdn Bhd for two years, withan extension for another year.

UMW Holdings Bhd, which

owns 55.7% of UMWOG, hasextended an RM308 million in-ter-company loan for UMWOG’s

working capita l re quirement s.Te loan interest rate is set at thesix-month Kuala Lumpur Inter-bank Offered Rate of +1.75% perannum, with a repayment periodof ve years.

Tis is a positive development, which highlight’s UMW’s paren-tal support for UMWOG, whichhas to resolve its RM2.1 billiondebt due for repayment soon.However, this is only a temporaryband-aid, as the inter-companyloan represents only 15% of therenancing requirements.

UMWOG’s 1QFY16 negativeearnings before interest, taxes,

depreciation and amortisationof RM5 million indicated that thecoming months may be worse,given that the majority of its as-sets are currently not being uti-

lised or secured by a long-termcharter.

As such, we expect nego tia-tions with nancial institutionsfor UMWOG’s existing debt toinclude some form of corporateguarantee from its parent, whichrequires shareholder approv-al. We also do not discount thepossibility of a dilutive debt re-structuring exercise, which mayinvolve an equity-raising scheme.

Currently, only two of thegroup’s eight rigs are in opera-tion: the semi-submersible Naga1 and jack-up rig Naga 7. How-ever, Naga 7’s charter will expirenext month, which means thatonly one rig will be in operation

from July to October, when theNaga 8 jack-up rig will recom-mence operation together withNaga 6, which has just securedthe Petronas Carigali contract.

The outlook for UMWOG, which derives most of its revenuefrom drilling rigs, remains chal-lenging in the near to mediumterm, as a slowdown in the sectormaintains downward pressure onday rates, which are exacerbat-ed by an inux of uncontractednewbuilds.

Hence, the stock currentlytrades at a 32% discount to itslatest book value of RM1.39 pershare, which could be eroded byfurther losses. — AmInvestmentResearch, June 3

Outlook for UMWOG remainschallenging in near to medium term

S P Setia Bhd(June 3, RM3.16)Maintain buy with a target price(TP) of RM3.70: We recently visitedSetia Eco Templer, which is a 194-acre (78.51ha) township develop-ment in Rawang, Selangor, locatedabout 25km away from Kuala Lum-pur City Centre. Recently launchedin May, the township was built witha focus on being environmentalfriendly, and creating a harmoni-ous co-existence between man andnature.

Total gross development value

(GDV) of Setia Eco empler is RM2billion, and the expected comple-tion period is between eight and 10

years. Phase 1 launch has alreadyachieved a 95% take-up rate. Outof the 234 units available in Phase1, with a GDV of RM280 million, S PSetia Bhd has successfully sold 222units of the property worth RM250million.

Note that Phase 1 consists of 176units of link houses priced fromRM850,000, 52 units of semi-de-tached houses priced from RM1.7million and six units of bungalowspriced from RM2.8 million.

We gather that there were only12 units of semi-detached housesavailable for sale, due to the strongtake-up in the past few weeks. Webelieve that the strong take-up rateseen was due to the special offer of SP Setia’s 10:90 programme, in whichbuyers only need to pay a 10% de-posit. For the remaining 90%, buyers

will have up to three years to securethe loan facility, as they are onlyrequired to do so after taking the

vacant possession of the property. We maintain our nancial year

ending Dec 31, 2016 (FY16) salestarget of RM4 billion. We have in-cluded sales of Setia Eco Templerinto our FY16 sales estimate previ-ously. We also maintain our FY16

Evergreen Fibreboard Bhd(June 3, RM1.12)Maintain buy with an unchangedtarget price (TP) of RM1.60: Ourrating and P for Evergreen Fibre-board Bhd are based on unchanged11 times nancial year ending Dec31, 2017 (FY17) core earnings pershare estimate of 14.6 sen.

In the absence of pricing premi-um (as a result of demand weak-ness), coupled with rising trans-portation costs to the Middle East(as transportation costs are borne

by Evergreen), management hasstarted diverting its marketing ef-forts from the Middle East back tothe Southeast Asian region.

Despite the average selling price(ASP) pressure on medium-den-sity breboard (MDF) products,

we continue to see strong earn-ings prospects for the company.

S P Setia Bhd

FYE DEC (RM MIL) 2013* 2014* 2015** 2016F 2017F

Revenue 3,261 3,810 6,746 6,272 6,632

Core Ebit 746 830 1,643 1,188 1,255

Core PBT 658 769 1,428 1,129 1,194

Net income 418 406 918 714 788

Core net income 418 453 920 714 788

EPS (sen) 17.95 16.30 35.66 28.12 31.01

Core EPS (sen) 17.95 18.19 35.72 28.12 31.01

Net DPS (sen) 10.60 9.70 23.00 18.34 20.23

Net dividend yield (%) 3.3 3.1 7.3 5.8 6.4

Core PER 17.7 17.4 8.9 11.3 10.2

NTA/share (RM) 2.35 2.31 3.00 3.10 3.21P/NTA 1.35 1.37 1.06 1.02 0.99

Core ROE (%) 7.6 7.7 12.4 9.3 9.9

Core ROA (%) 3.5 3.5 5.6 4.3 4.6

*Financial year ended October

**FY15 reflects a 14-months period (November 2014 to December 2015)

Source: Company, MIDF Research forecast

and FY17 core net income estimatesat RM714 million and RM788 mil-lion respectively.

We maintain “buy” with a TP ofRM3.70, based on a 10% discountto revalued net asset valuation. Welike S P Setia due to the recent con-

rmation of Datuk Khor Chap Jen aschief executive offi cer — which hasremoved the company’s leadershipuncertainty, its high dividend yieldof 5.8% and strong balance sheet,

with a net gearing of 0.28 times. —MIDF Research, June 3

Strong earnings prospects seen for Evergreen

UMW Oil & Gas Corp Bhd

FYE DEC (RM MIL) 2015 2016F 2017F 2018F

Revenue 839.5 462.1 500.4 730.6

Core net profi t (65.2) (351.9) (333.1) (155.2)

FD core EPS (sen) (3.0) (16.3) (15.4) (7.2)

FD core EPS growth (%) (125.9) 439.9 (5.3) (53.4)

Consensus net profit - (153.1 ) (76.7 ) (88.8)

EV/Ebitda (x) 21.1 nm nm 65.9

ROE (%) (11.3) (11.0) (11.7) (6.0)

Net gearing (%) 90.3 102.9 122.8 133.5

Source: AmInvestment Bank Bhd estimates

Renewed weakness in the ringgitagainst the US dollar, arising from amore hawkish US Federal Reserveand lacklustre domestic marketoutlook, is a boon to Evergreen’searnings.

Costs of key inputs (rubber log wood and glue) continue to trendlower, and these will partly alleviatemargin pressure from lower ASPs.Evergreen is on track to reap morebenets from its cost rationalisa-tion exercise.

Its new ready-to-assemble (RA)

furniture line has commenced com-mercial operation since May. Hav-ing convinced of the potential of theRA furniture business, Evergreenhas placed deposits for an addi-tional RTA furniture line, which isexpected to commence operation(hence contributing to its bottomline) by the second half of FY17.

Risks involve escalating rawmaterial and labour costs, weak-er-than-expected demand forMDFs and fluctuating foreign-cur-rency movements (particularly

the US dollar). We lower our FY16 net profit

forecast by 10.7% to RM102.8 mil-lion, largely to account for lowerblended ASP assumption for MDFs

Evergreen Fibreboard Bhd

FYE DEC (RM MIL) 2014A 2015A 2016F 2017F

Revenue 939 1,014 875 1,029

Ebitda 96.8 229.7 207.3 235.4

PBT 25.2 114.9 133.0 158.7

Net profit 0.2 92.6 105.5 126.6

Core net profit -3.2 26.5 105.5 126.6

Core EPS (sen) -0.4 3.1 12.5 15.0

PER (x) nm 35.8 8.8 7.4

BVPS (RM) 0.95 1.21 1.32 1.47

P/BV (x) 1.2 0.9 0.8 0.7

ROA (%) nm 1.9 6.7 7.4

ROE (%) nm 2.5 9.4 10.2

Source: HLIB

and a lower rubber log wood costassumption.

Al so , ou r FY 17 ne t pr of itforecast remains unchanged atRM123.4 million, as our lowerblended ASP assumption for MDFproducts is offset by the lowerrubber log wood cost assumption,contributions from the additionalRTA production line and an up-

ward revis ion of our US dol lar/ringgit assumption.

Our rating includes positivesmade up of attractive valuations

with good earnin gs visibi lity , ahealthy balance sheet and its rub-ber plantation land bank value,

which has yet to be reected in itscurrent share price valuation. De-mand weakness in the Middle Eastforms a negative for the company.— Hong Leong Investment BankResearch, June 3

An artist’s impression of Setia Eco Templer’s entrance.


14/33

B R O K E R S ’ C A L L 1 3ONDAY JUNE 6, 2016 • T HEEDGE FINANCIAL DAILY

Econpile secures RM208m pilingworks for Jalan Ampang project

Freight Management’s 3Qresults with

in expectationseight Management Holdings Bhdast traded price, RM1.21)old with a target price (TP) ofM1.31: Freight Managementoldings Bhd’s (FMH) third nan-al quarter ended March 31, 2016QFY16) results were generallythin our earlier expectations.During 3QFY16, the group re-rded a revenue of RM103.3 mil-

on and a net prot after tax andinority interest (Patmi) of RM4.7illion. Its revenue was roughly theme year-on-year (y-o-y), while

atmi was up by 7.8% y-o-y. Te

crease in revenue was mainlyntributed by the third party logis-

cs (3PL) and warehousing, anda freight and air freight segments.Its earnings benefited from

onger earnings contribution fromsea freight segment, which en-

yed favourable freight rates andoduct mix. However, the group’sg and barge, and customs bro-rage segments recorded lowerrnings during the quarter.Overall, we expect that FMH will

ave a positive outlook in FY16 toY17. Te group’s growth would benderpinned by its core sea freightusiness. Additionally, FMH’s man-

ement expects its “3PL and ware-ousing” business segment to grow

further in the upcoming quarters.Nevertheless, we are mindful of

the challenging external operatingenvironment given the slow globaleconomic growth and stiff competi-tion within the logistics industry. Tegroup’s less-than-a-container-loadfreight volume (in 20 foot-equivalentunit terms) still grew y-o-y duringits nine months ended March 31,2016, while its full-container-loadsegment recorded a marginal dropin freight volume.

In the 3PL segment, FMH hasbuilt quite a reputation, particularly

for sectors such as lubricants, highfashion/apparels and consumerelectrical products. Tis segment’sgrowth was aided by the group’snewly built warehouse facilitiesin Port Klang.

Tis was done, partly in view ofits expanding list of pharmaceuti-cal and healthcare clients that re-quire climate-controlled storagespace. In recent times, the grouphas successfully obtained new cli-ents from the pharmaceutical, foodand beverage, and electrical con-sumer goods industries.

We note that FMH’s freight busi-ness is mostly focused on trade

within the Asia-Australia region,as such the group would general-

conpile Holdings Bhdune 3, RM1.36)aintain buy with an unchangedir value of RM1.90 per share:

Tis is pegged at 14 times forecastr nancial year ending June 30,17 (FY17) price-earnings ratioER). Econpile Holdings Bhd is

urrently trading at 11 times PER.Econpile has secured a RM208illion contract to undertake pil-g works for a mixed commercialvelopment in Jalan Ampang. Tentract was awarded by Oxley Ris-g Sdn Bhd. Te contract entails

ored piling and pile caps, dia-hragm walls, earthworks, foun-ation and substructure works.

Te duration of the contract is 26onths.Based on reports, Oxley Ris-

g (part of Singapore-listed Ox-y Holdings Ltd) is building aree-tower development rang-g from 28 to 79 storeys on threeres (1.2ha) of land in Jalan Am-

ang. Te site is adjacent to the

etronas win owers.Dubai-based Jumeirah Groupl l operate a 190-room luxury

otel and 273 premium residencesthin the development, which ispected to be completed in 2021.We are ple asan tly surpri sedthe latest win, which brings

conpile’s new job wins in FY16

UMW Holdings Bhd(June 3, RM5.05)Maintain hold with a target priceof RM5.01: UMW Holdings Bhd(UMW) announced that it had pro-

vided an inter-company loan ofRM308 million to 55.7%-ownedsubsidiary UMW Oil & Gas CorpBhd (UMWOG) to fund the latter’s

working capital requirements.

Te loan is provided at an inter-est rate of six-month Kuala LumpurInterbank Offered Rate of +1.75%per annum and has a repaymentperiod of ve years.

UMW said the loan will be fund-ed by its own internal funds. Tecompany was in a net debt posi-tion of RM3.5 billion and had a netgearing of 53.7% as at end-March.

We make no changes to our num-bers following the inter-companyloan. However, we see it as a mild-ly negative move given that the in-ter-company loan (which represent-ed 1.7% of UMW’s total assets as atend-2015) is being directed towards arisky asset and results in some deteri-oration to UMW’s own asset quality.

We ret ain ou r fai r va lue of

RM4.90 on the company, whichis still beset by poor prospects forits two key segments.

Te question of the RM2.1 billionin short-term debt in UMWOG stilllooms with the bulk of it due soon,raising the possibility of a debt re-nancing or potential cash call that

would require UMW’s support. — AmInvestment Bank, June 3

Freight Management Holdings Bhd

FYE JUNE (RM MIL) 2013 2014 2015 2016F

Revenue 364.8 403.3 420.3 416.0

Operating profit 32.0 33.1 27.9 31.4

Depreciation (10.6) (11.2) (13.5) (13.5)

Interest expenses (1.9) (2.1) (3.0) (4.0)

Profit before tax (PBT) 30.2 30.8 24.2 27.3

Effective tax rate (%) 18.0 17.1 17.6 18.9

NPatmi 22.6 24.0 20.1 20.7

Operating margin (%) 8.8 8.2 6.6 7.5

PBT margin (%) 8.3 7.6 5.8 6.6

NPatmi margin (%) 6.2 6.0 4.8 5.0

*NPatmi=net profit after tax & minority interest

Source: Mercury Securities

Econpile Holdings Bhd

FYE JUNE (RM MIL) 2015 2016F 2017F 2018F

Revenue 429.0 481.0 545.4 585.0

Core net profit 46.6 66.5 72.5 77.8

FD core EPS (sen) 8.7 12.4 13.5 14.5

FD core EPS growth (%) 50.3 42.7 8.9 7.4

Consensus net profi t - 64.6 69.2 77.8

DPS (sen) 2.5 3.5 3.5 3.5

PER (x) 15.6 10.9 10.0 9.4

EV/Ebitda (x) 8.9 5.9 5.0 4.2

Dividend yield (%) 1.9 2.7 2.7 2.7

ROE (%) 25.4 29.7 26.4 23.5

Source: Company, AmInvestment Bank

UMW Holdings Bhd

FYE DEC (RM MIL) 2014 2015 2016F 2017F 2018F

Revenue 14,932.5 14,441.6 12,770 .5 13,427.7 13,768.1

Core net profit 842.5 218.1 181.2 230.7 338.2

FD core EPS (sen) 72.1 18.7 15.5 19.7 28.9

FD core EPS growth (%) (12.3) (74.1) (16.9) 27.3 46.6

Consensus net profit - - 218.6 336.7 378.2DPS (sen) 44.0 41.0 7.8 9.9 14.5

PER (x) 6.9 26.8 32.3 25.4 17.3

EV/Ebitda (x) 3.7 14.1 15.2 13.1 9.0

Dividend yield (%) 7.8 7.6 1.4 1.8 2.7

ROE (%) 10.1 (0.4) 2.8 3.5 5.1

Net gearing (%) 12.4 49.8 48.2 54.7 57.1

Source: Company, AmInvestment Bank Bhd estimates

ly not be affected substantially byany weak business sentiment in theUnited States and Europe.

Emerging and developing Asiancountries (including China andIndia) still record strong gross do-mestic product growth of above6%. Furthermore, the group has itscompetitive advantage arising fromits niche in providing one-stop andpackaged services to customers.

FMH has a one-stop businessmodel and calculated growth strat-egy. With a strong managementteam and a multimodal, asset-light,tight cost-control and operational-

ly effi cient business model, FMHpossesses positive long-term pros-pects. Te group also has amplecapabilities, nancial reserves andoperational exibility to expand or-ganically and also to explore new

joint venture (JV) and merger andacquisition (M&A) opportunities.

Further upside group earnings would be dependent on factors suchas freight volumes, freight rates, re-gional business expansion, globaleconomic growth, cost control, peercompetition, 3PL client additionsand also any future JVs and M&As.

As usual, there are possible risk

factors to the group, such as the weak global economy, volatile -nancial markets, weak crude oil/commodity prices, and political/military upheavals. FMH’s protmargins could also be impactedduring times of sudden or height-ened foreign exchange and freightrate uctuations.

FMH’s board of directors hasdeclared a rst interim single-tierdividend of 1.5 sen per share forFY16. he dividend will be paidon July 28. Given FMH’s relativelysteady earnings performance, we

believe that the group will maintainits dividend payout track record ofat least 30%, for FY16.

Based on our forecast of FMH’sFY16 earnings per share and anestimated price-earnings ratio of11 times, we set a FY16-end P ofRM1.31. Tis P is slightly abovethe market price on the date ofthis report.

Our P for FMH reects a price-to-book value of one time over itsFY16 book value per share. Our“hold” call does reflect our cau-tious view on the regional and globalbusiness and trade environment.

We expect FMH’s FY16 revenue andearnings to be quite attish y-o-y. —Mercury Securities Sdn Bhd, May 26

to RM655 million (FY15: RM490million). Tis has surpassed ourreplenishment target of RM500million by 31%.

Nevertheless, as we have previously guid ed, we bel ieve any jobs secured this month will onlycontribute strongly to the group’searnings in FY17. Hence, we makeno changes to our numbers. For

FY17, we have a new order booktarget of RM450 million with apotential upside.

Te latest win is timely as 20%of the group’s capacity will be freedup following the completion of afew projects next month. Giventhe scope and nature of the latest

job, we beli eve margi ns shou ld

be attractive. Outstanding orderbook of RM778 million will sup-port earnings until 2018.

We believe more jobs will owthrough in the coming months

with potential wins from the Klang Valley mass rapid transit Line 2and highways (Sungai Besi-UluKlang Elevated Expressway, Da-mansara-Shah Alam Highway and

Duta-Ulu Klang Expressway). All in, we continue to like Econ-pile for its strong track record asa leading piling specialist, contin-ued contract wins on resilient de-mand, and stable margins. Since itslisting, net margin has expandedfrom 6.5% to 15%. — AmInvestment Bank, June 3

UMW’s loan to subsidiary seenas a mildly negative move


15/33


16/33


17/33

1 6 H O M E MONDAY JUNE 6, 2016 • T HE EDGE F INANCIAL DAILY

Four-cornered contest

for Kuala Kangsar seat With candidates from BN, PAS, Amanah and an independentKUALA KANGSAR: Te Kuala Kang-sar parliamentary by-election is afour-cornered contest involvingBarisan Nasional (BN), PAS, Parti

Amanah Negara (Amanah) and anindependent candidate.

hey are Datin Mastura Mohd Yazid of BN, Perak PAS Women’schief Dr Najihatussalehah Ahmad,Kuala Kangsar Amanah vice-chiefProf Dr Ahmad ermizi Ramli andindependent candidate Izat Bukhary

Ismail Bukhary.Returning offi cer Mior Muham-

mad Jamil Mior Zakaria announcedtheir names after the close of nomi-nations at Dewan Jubli Perak here.

“I am satised with the nomina-tion papers. No papers were reject-ed,” he said before announcing thenames of the candidates.

Te by-election is being held fol-

SUNGAI BESAR: Te Sungai Be-sar parliamentary by-election isa three-cornered contest amongBarisan Nasional (BN), PAS andParti Amanah Negara (Amanah).

he candidates are BudimanMohd Zohdi of BN, Dr Abdul RaniOsman of PAS and Azhar AbdulShukur of Amanah.

Returning offi cer Mohd Khairud-din Md Som announced the namesof the candidates at 10.28am afternominations closed at 10am.

He said he was satisfied withthe nomination papers led by thecandidates, and supporters of thecandidates erupted into applause.

Budiman is the state assembly-man for Sungai Panjang and Dr

Abdul Rani is the state assembly-

man for Meru.Te by-election has been calledfollowing the death of member ofparliament an Sri Noriah Kasnon,in a helicopter c

the edgemarkets

Documents